EXHIBIT 2.33
AGREEMENT AND PLAN OF MERGER
by and between
IXL HOLDINGS, INC.,
iXL-CONNECTICUT, INC.,
PEQUOT SYSTEMS, INC.
AND
THE PEQUOT SHAREHOLDERS
Dated as of SEPTEMBER 24, 1998
AGREEMENT AND PLAN OF MERGER
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THIS AGREEMENT AND PLAN OF MERGER is entered into as of this 24th day of
September, 1998, by and between Pequot Systems, Inc., a Connecticut corporation
("Pequot"), IXL Holdings, Inc., a Delaware corporation ("Parent"), iXL-
Connecticut, Inc., a Delaware corporation, or its successors or assigns ("Sub"),
and the shareholders of Pequot as listed on the signature page hereto (the
"Pequot Shareholders").
R E C I T A L S:
- - - - - - - -
A. Pequot is engaged in the business of developing internet sites and
furnishing internet services, including website design and maintenance (the
"Pequot Business").
B. Pequot and Sub each desire to merge their respective companies and
business operations, all on the terms and subject to the conditions set forth
herein (the "Merger").
C. The Pequot Shareholders collectively own 100% of the issued and
outstanding capital stock of Pequot (the "Pequot Stock").
D. The respective Boards of Directors of Parent, Sub and Pequot, and the
respective shareholders of Sub and Pequot, have approved the Merger, upon the
terms and subject to the conditions set forth herein.
E. The parties hereto intend for the Merger to qualify, for federal income
tax purposes, as a reorganization within the meaning of Section 368(a) of the
Internal Revenue Code of 1986, as amended (the "Code").
NOW, THEREFORE, in consideration of the mutual covenants, benefits, conditions
and agreements set forth herein and for other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, it is hereby
agreed as follows:
ARTICLE I
THE MERGER
1.1 The Merger. Upon the terms and subject to the conditions hereof, at the
Effective Time (as defined in Section 1.3 hereof), (a) Pequot shall be merged
with and into Sub, (b) the separate existence of Pequot shall cease, and (c) Sub
shall continue as the surviving corporation in the Merger under the laws of the
State of Delaware under the name iXL-Connecticut, Inc. For purposes of this
Agreement, Sub shall be referred to, for the period commencing on the Effective
Time, as the "Surviving Corporation."
1.2 Closing and Closing Date. Unless this Merger Agreement shall have been
terminated and the transactions herein contemplated shall have been abandoned
pursuant to Section 9.1 hereof, and subject to the satisfaction or waiver of the
conditions set forth in Article VII hereof, the closing of the Merger (the
"Closing") will take place as promptly as practicable (and in any event within
five business days after satisfaction of the conditions set forth in Sections
7.1 and 7.2 hereof) (the "Closing Date") at the offices of ▇▇▇▇▇▇ & ▇▇▇▇▇▇, A
Professional Corporation, One Buckhead Plaza, ▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇., ▇▇▇. ▇▇▇▇,
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇, unless another date or place is agreed to by the parties.
1.3 Effective Time of the Merger. At the Closing, the parties hereto shall
cause (a) a certificate of merger (the "Delaware Certificate of Merger") to be
filed with the office of the Secretary of State of Delaware in accordance with
the provisions of the Delaware General Corporation Law, as amended (the "DGCL");
and (b) Certificate of Merger (the "Connecticut Certificate of Merger";
collectively with the Delaware Certificate of Merger, the "Certificate of
Merger") to be filed with the office of the Secretary of State of Connecticut in
accordance with the provisions of the Connecticut Business Corporation Act (the
"CBCA"). When used herein, the term "Effective Time" shall mean the time when
the Delaware Certificate of Merger has been accepted for filing by the Secretary
of State of Delaware, or such time as otherwise specified therein.
1.4 Effect of the Merger. The Merger shall, from and after the Effective Time,
have all the effects provided by the DGCL and the CBCA. If at any time after the
Effective Time, any further action is deemed necessary or desirable to carry out
the purposes of this Agreement, the parties hereto agree that the Surviving
Corporation and its proper officers and directors shall be authorized to take,
and shall take, any and all such action.
ARTICLE II
THE SURVIVING CORPORATION
2.1 Certificate of Incorporation. The Certificate of Incorporation of Sub, a
form of which is attached to a closing certificate and incumbency certificate,
substantially in the form of Exhibit "A-2" hereto ("Sub's Closing Certificate"),
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shall be the Certificate of Incorporation of the Surviving Corporation after the
Effective Time, until thereafter changed or amended as provided therein or by
applicable law.
2.2 Bylaws. The Bylaws of Sub as in effect immediately prior to the
Effective Time shall be the Bylaws of the Surviving Corporation, until
thereafter changed or amended as provided therein or by applicable law. A copy
of the Bylaws of Sub is attached to the Sub's Closing Certificate.
2.3 Board of Directors; Officers. The Board of Directors and officers of Sub
immediately prior to the Effective Time shall be the Board of Directors and
officers, respectively,
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of the Surviving Corporation, until the earlier of their respective resignations
or the time that their respective successors are duly elected or appointed and
qualified.
ARTICLE III
CONVERSION OF SHARES
3.1 Merger Consideration. As of the Effective Time:
(a) All shares of Pequot Stock owned by Pequot shall, by virtue of the
Merger and without any action on the part of any shareholder, officer or
director of Pequot or Sub, be canceled and retired and shall cease to exist, and
no consideration shall be delivered in exchange therefor.
(b) Each issued and outstanding share of Pequot Stock (other than any
Dissenting Shares, as defined in Section 3.2 hereof) shall, upon surrender to
Sub, at the Closing, of the underlying share certificates, be converted into,
and become exchangeable for (i) a number of shares of validly issued, fully paid
and nonassessable Class B Common Stock of Parent, $.01 par value (the "Parent
Stock") based on the following equation:
PS = 382,500 - D
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$10
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S
where:
PS = the number of shares of Parent Stock (valued, as of the
Closing, at $10 per share) for which each share of Pequot
Stock shall be exchanged pursuant to the Merger
D = any outstanding indebtedness of Pequot (the "Pequot Debt"),
including debt for borrowed money and accrued interest
thereon, capital leases, and any unpaid legal or accounting
fees of Pequot which exceed $75,000, but excluding current
accounts payable (less than 60 days old), all to be
determined as of three business days prior to the Closing
Date and all as determined in accordance with generally
accepted accounting principles ("GAAP")
S = the number of issued and outstanding shares of Pequot Stock
on the Closing Date; and
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(ii) an amount of cash based upon the following equation:
C = $660,000
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S
where:
C = the amount of cash to be received for each share of Pequot
Stock
S = the number of issued and outstanding shares of Pequot Stock on
the Closing Date.
(c) Each issued and outstanding share of common stock of Sub shall, by
virtue of the Merger and without any action on the part of any shareholder,
officer or director of Pequot or Sub, be converted into and become one fully
paid and nonassessable share of common stock of the Surviving Corporation.
3.2 Dissenting Shares. Notwithstanding any provision hereof to the
contrary, any shares of Pequot Stock held by a Dissenting Shareholder (as
hereinafter defined) shall not be converted as described in Section 3.1(b)
hereof, but instead shall be converted into the right to receive the
consideration due a Dissenting Shareholder pursuant to the DGCL or CBCA, as
applicable, provided, however, that if a Dissenting Shareholder shall fail to
perfect his demand, withdraw his demand or otherwise lose his right for
appraisal under the terms of the DGCL or CBCA, as applicable, then the Pequot
Stock held by such Dissenting Shareholder (the "Dissenting Shares") shall be
deemed to be converted as of the Effective Time in accordance with the
provisions of Section 3.1 hereof. Pequot shall not voluntarily make any payment
with respect to, settle, or offer to settle or otherwise negotiate, any such
demands. All amounts paid to Dissenting Shareholders shall be paid without
interest thereon (to the extent permitted by applicable law) by the Surviving
Corporation. For purposes hereof, the term "Dissenting Shareholder" shall mean
a Pequot Shareholder who (a) objects to the Merger; and (b) complies with the
applicable provisions of the DGCL or CBCA concerning dissenter's rights.
3.3 No Further Rights. From and after the Effective Time, holders of
certificates theretofore evidencing Pequot Stock shall cease to have any rights
as stockholders of Pequot, except as provided herein or by applicable law.
3.4 Closing of Pequot's Transfer Books. At the Effective Time, the stock
transfer books of Pequot shall be closed and no transfer of Pequot Stock shall
be made thereafter. If after the Effective Time, certificates for Pequot Stock
are presented to Parent or the Surviving Corporation, they shall be canceled and
exchanged for a consideration as set forth in Section 3.1 hereof, subject to
applicable law in the case of Dissenting Shareholders.
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ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PEQUOT
Pequot, and the Pequot Shareholders, jointly and severally, represent and
warrant to Parent and Sub as follows, which representations and warranties shall
survive the Closing in accordance with Section 10.1 hereof.
4.1 Organization and Qualification. Pequot is a corporation duly organized,
validly existing and in good standing under the laws of the State of
Connecticut. Pequot has the requisite corporate power and authority to carry on
the Pequot Business as it is now being conducted and is duly qualified or
licensed to do business, and is in good standing, in each jurisdiction where the
character of its properties owned or held under lease or the nature of its
activities makes such qualification necessary. Complete and correct copies of
the Certificate of Incorporation and Bylaws of Pequot as in effect on the date
hereof are attached to a closing certificate and incumbency certificate,
substantially in the form of Exhibit "E" hereto ("Pequot's Closing
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Certificate"). The minute book of Pequot, a true and complete copy of which has
been delivered to Parent, (a) accurately reflects all action taken by the
directors and shareholders of Pequot at meetings of Pequot's Board of Directors
or shareholders, as the case may be; and (b) contains true and complete copies,
or originals, of the respective minutes of all meetings or consent actions of
the directors or shareholders.
4.2 Authority. Pequot has the necessary corporate power and authority to
execute and deliver this Agreement and to consummate the transactions
contemplated hereby. The execution and delivery hereof and the consummation of
the transactions contemplated hereby by Pequot have been duly and validly
authorized and approved by Pequot's Board of Directors and the Pequot
Shareholders, and no other corporate or shareholder proceedings on the part of
Pequot, its Board of Directors or the Pequot Shareholders is necessary to
authorize or approve this Agreement or to consummate the transactions
contemplated hereby. This Agreement has been duly executed and delivered by
Pequot and each Pequot Shareholder, and assuming the due authorization,
execution and delivery by Parent and Sub, constitutes the valid and binding
obligation of Pequot and each Pequot Shareholder, enforceable against Pequot and
each Pequot Shareholder in accordance with its terms subject, in each case, to
bankruptcy, insolvency, reorganization, moratorium and similar laws of general
application relating to or affecting creditors' rights and to general principles
of equity, including principles of commercial reasonableness, good faith and
fair dealing.
4.3 Capitalization.
(a) The authorized capital stock of Pequot consists of 20,000 shares of
common stock, no par value, of which 20,000 shares are validly issued and
outstanding, fully paid and nonassessable. All outstanding capital stock of
Pequot was issued in accordance with applicable federal and state securities
laws; to the extent otherwise, the variance can not reasonably be expected to
have any material adverse effect. Except as set forth on Schedule 4.3(a) hereto,
there are no options, warrants, calls, convertible notes, agreements,
commitments or other rights presently outstanding that would obligate Pequot or
any of the Pequot Shareholders to issue,
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deliver or sell shares of its capital stock, or to grant, extend or enter into
any such option, warrant, call, convertible note, agreement, commitment or other
right. In addition to the foregoing, as of the date hereof, Pequot has no bonds,
debentures, notes or other indebtedness issued or outstanding that have voting
rights in Pequot. Schedule 4.3(a) sets forth a list of (i) all holders of record
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of (A) Pequot Stock, and (B) options, warrants, convertible notes or other
rights to purchase capital stock of Pequot (collectively, "Pequot Stock
Rights"); (ii) the number of shares held by each Pequot Shareholder and the
number of shares of capital stock of Pequot represented by the Pequot Stock
Rights; and (iii) the exercise price, date of grant, duration and vesting
schedule for each Pequot Stock Right.
(b) All of the issued and outstanding shares of capital stock of Pequot
are validly issued, fully paid and nonassessable. Except as set forth on
Schedule 4.3(b) hereto, each Pequot Shareholder represents and warrants that the
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Pequot Stock held by such Pequot Shareholder is free and clear of any lien,
charge, security interest, pledge, option, right of first refusal, voting proxy
or other voting agreement, or encumbrance of any kind or nature other than
restrictions on transfer imposed by federal and state securities laws (any of
the foregoing, a "Lien").
4.4 Subsidiaries. Pequot has no subsidiaries and does not otherwise own or
control, directly or indirectly, any equity interest, or any security
convertible into an equity interest, in any corporation, partnership, limited
liability company, joint venture, association or other business entity (any of
the foregoing, an "Entity").
4.5 No Conflicts, Required Filings and Consents. Except as set forth on
Schedule 4.5 hereto, none of (i) the execution and delivery of this Agreement by
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Pequot or the Pequot Shareholders, (ii) the consummation by Pequot and the
Pequot Shareholders of the transactions contemplated hereby or (iii) compliance
by Pequot with any of the provisions hereof will:
(a) conflict with or violate the Certificate of Incorporation or Bylaws
of Pequot;
(b) result in a violation of any statute, ordinance, rule, regulation,
order, judgment or decree applicable to Pequot or any of the Pequot
Shareholders, or by which Pequot or any of its properties or assets may be bound
or affected;
(c) result in a violation or breach of, or constitute a default (or an
event that, with notice or lapse of time or both, would become a default) under,
or give to any other any right of termination, amendment, acceleration or
cancellation of, any note, bond, mortgage, indenture, or any material contract,
agreement, arrangement, lease, license, permit, judgment, decree, franchise or
other instrument or obligation, to which Pequot is a party or by which Pequot or
any of its properties or assets may be bound or affected;
(d) result in the creation of any Lien on any of the property or assets
of Pequot; or
(e) require any consent, waiver, license, approval, authorization, order,
permit, registration or filing with, or notification to (any of the foregoing
being a "Consent"), (i) any
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government or subdivision thereof, whether domestic or foreign, or any
administrative, governmental, or regulatory authority, agency, commission,
court, tribunal or body, whether domestic, foreign or multinational (any of the
foregoing, a "Governmental Entity"), except for the filing of the Certificate of
Merger pursuant to the DGCL and the CBCA; or (ii) any other individual or Entity
(collectively, a "Person").
4.6 Financial Statements. Pequot has heretofore furnished Parent with a true
and complete copy of (a) the unaudited financial statements of Pequot for the
period ended December 31, 1996 and the year ended December 31, 1997; and (b) the
unaudited financial statements of Pequot for the six month period ended June 30,
1998 (all of the foregoing collectively herein referred to as the "Pequot
Financial Statements"). Except as disclosed therein, the Pequot Financial
Statements present fairly, in all material respects, the financial position and
operating results of Pequot as of the dates, and during the periods, indicated
therein on a consistent basis in accordance with the cash-basis method of
accounting.
4.7 Absence of Changes. Except as provided in Schedule 4.7 hereto and except
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as contemplated hereby, since June 30, 1998 (a) Pequot has not entered into any
transaction that was not in the ordinary course of business; (b) except for
sales of services and licenses of software in the ordinary course of business,
there has been no sale, assignment, transfer, mortgage, pledge, encumbrance or
lease of any material asset or property of Pequot; (c) there has been (i) no
declaration or payment of a dividend, or any other declaration, payment or
distribution of any type or nature to any shareholder of Pequot in respect of
its stock, whether in cash or property, and (ii) no purchase or redemption of
any share of the capital stock of Pequot; (d) there has been no declaration,
payment, or commitment for the payment, by Pequot, of a bonus or other
additional salary, compensation, or benefit to any employee of Pequot that was
not in the ordinary course of business, except for normal year-end bonuses paid
in the ordinary course of business; (e) there has been no release, compromise,
waiver or cancellation of any debt to or claim by Pequot, or waiver of any right
of Pequot; (f) there have been no capital expenditures in excess of $10,000 for
any single item, or $25,000 in the aggregate; (g) there has been no change in
accounting methods or practices or revaluation of any asset of Pequot (other
than Pequot Accounts Receivable as defined in Section 4.26 hereof written down
in the ordinary course of business in excess of $10,000 for any single Pequot
Accounts Receivable, or $25,000 in the aggregate); (h) there has been no
material damage, or destruction to, or loss of, physical property (whether or
not covered by insurance) adversely affecting the Pequot Business or the
operations of Pequot; (i) there has been no loan by Pequot, or guaranty by
Pequot of any loan, to any employee of Pequot; (j) Pequot has not ceased to
transact business with any customer that, as of the date of such cessation,
represented more than 5% of the annual gross revenues of Pequot; (k) there has
been no termination or resignation of any key employee or officer of Pequot, and
to the knowledge of Pequot, no such termination or resignation is threatened;
(l) there has been no amendment or termination of any material oral or written
contract, agreement or license related to the Pequot Business, to which Pequot
is a party or by which it is bound, except in the ordinary course of business,
or except as expressly contemplated hereby; (m) Pequot has not failed to satisfy
any of its debts, obligations or liabilities related to the Pequot Business or
the assets of Pequot as the same become due and owing (except for Pequot
Accounts Payable (as defined in Section 4.27 hereof) payable in accordance with
past practices and in the ordinary course of business); (n) there has been no
agreement or commitment by Pequot to
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do any of the foregoing; and (o) there has been no other event or condition of
any character pertaining to and materially and adversely affecting the assets,
business or financial condition of Pequot.
4.8 Undisclosed Liabilities. Except as set forth on Schedule 4.8 hereto,
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Pequot has no debt, liability or obligation of any kind, whether accrued,
absolute or otherwise, including any liability or obligation on account of taxes
or any governmental charge or penalty, interest or fine, except (a) liabilities
incurred in the ordinary course of business after June 30, 1998, that would not,
whether individually or in the aggregate, have a material adverse impact on the
business or financial condition of Pequot; (b) liabilities reflected on the
Pequot Financial Statements; and (c) liabilities incurred as a result of the
transactions contemplated hereby.
4.9 Title to Properties. Except as set forth on Schedule 4.9 hereto, Pequot
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has good and marketable title to all tangible property and assets used in the
Pequot Business, and good and valid title to its leasehold interests, in each
case, free and clear of any and all Liens other than Permitted Liens (as defined
in Section 10.11 hereof).
4.10 Equipment. Pequot has heretofore furnished Parent with a true and
correct list of all items of tangible personal property (including computer
hardware) necessary for or used in the operation of the Pequot Business in the
manner in which it has been and is now operated by Pequot ("the Pequot
Equipment"), except for personal property having a net book value of less than
$1,000. Except as set forth on Schedule 4.10 hereto, each material item of
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Pequot Equipment is in good condition and repair, ordinary wear and tear
excepted.
4.11 Intellectual Property.
(a) Pequot has no material proprietary technology, patents, patent
rights, trademarks, trademark rights, trade names, trade name rights, service
marks, service ▇▇▇▇ rights, or copyrights (or pending applications for any of
the foregoing) used by Pequot in the conduct of the Pequot Business (together
with trade secrets and know how used in the conduct of the Pequot Business, the
"Pequot Intellectual Property Rights"). Pequot has no obligation to make any
payment (whether of a royalty, license fee, compensation or otherwise) with
respect to any Pequot Intellectual Property Right. No claims are pending or, to
the knowledge of Pequot, threatened, that Pequot is infringing or otherwise
adversely affecting the rights of any Person with regard to any Pequot
Intellectual Property Right. No Person is infringing the rights of Pequot with
respect to any Pequot Intellectual Property Right. Neither Pequot nor any
employee, agent or independent contractor of Pequot, in connection with the
performance of such Person's services with Pequot, has used, appropriated or
disclosed, directly or indirectly, any trade secret or other proprietary or
confidential information of any other Person, or otherwise violated any
confidential relationship with any other Person.
(b) Pequot has heretofore furnished Parent with a true and complete list
of all material computer software used by Pequot in the conduct of the Pequot
Business (the "Pequot Software"). Pequot currently licenses, or otherwise has
the legal right to use, all of the Pequot
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Software (including any upgrade, alteration or enhancement with respect
thereto), and all of the Pequot Software is being used in compliance with any
applicable license or other agreement.
4.12 Real Property. Except as set forth on Schedule 4.12 hereto:
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(a) Pequot has a good and valid leasehold interest in all real property
(including all buildings, improvements and fixtures thereon) used in the
operation of the Pequot Business (the "Pequot Real Property"). Pequot owns no
real property. Except for Permitted Liens, and for the items set forth on
Schedule 4.12, there are no Liens on Pequot's interest in any of the Pequot Real
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Property. Schedule 4.12 lists each county and state where any Pequot Real
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Property is located, or where Pequot has ever leased or owned any real property.
(b) There are no parties in possession of any portion of the Pequot Real
Property other than Pequot, whether as sublessees, subtenants at will or
trespassers.
(c) To the knowledge of Pequot, there is no law, ordinance, order,
regulation or requirement now in existence or under active consideration by any
Governmental Entity, that would require, under the provisions of any of the
Pequot Leases (as hereinafter defined), any material expenditure by Pequot to
modify or improve any of the Pequot Real Property to bring it into compliance
therewith.
4.13 Leases. Schedule 4.13 hereto sets forth a list of all leases pursuant
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to which Pequot leases, as lessor or lessee, real or personal property used in
operating the Pequot Business or otherwise (the "Pequot Leases"). Copies of the
Pequot Leases, all of which have previously been provided to Parent, are true
and complete copies thereof. All of the Pequot Leases are valid, binding and
enforceable against Pequot and, to the knowledge of Pequot, against the other
parties thereto, in accordance with their respective terms, and there is not
under any such Pequot Lease any existing default by Pequot, or, to the knowledge
of Pequot, by any other party thereto, or any condition or event that, with
notice or lapse of time or both, would constitute a default. Pequot has not
received notice that the lessor of any of the Pequot Leases intends to cancel,
suspend or terminate such Pequot Lease or to exercise or not exercise any option
thereunder.
4.14 Contracts. Schedule 4.14 hereto sets forth a true and complete list of
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all contracts, agreements and commitments (whether written or oral) to which
Pequot is, directly or indirectly, a party (in its own name or as a successor in
interest), or by which it or any of its properties or assets is otherwise bound,
including any service agreements, customer agreements, supplier agreements,
agreements to lend or borrow money, shareholder agreements, employment
agreements, agreements relating to Pequot Intellectual Property Rights and the
like (collectively, the "Pequot Contracts"); excepting only those Pequot
Contracts which involve less than $10,000 and are cancelable, without penalty,
on no more than 90 days' notice. Schedule 4.14 does not include any contracts,
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agreements or commitments as to which performance has been completed. The
aggregate value of all payment obligations and rights to receive payments, under
agreements, contracts and commitments (whether oral or in writing) to which
Pequot is a party or by which it or any of its properties or assets is otherwise
bound, and that are not listed on Schedule 4.14, is less
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than $50,000 (calculating such value by adding together the value of rights and
obligations, and not by determining the net amount thereof).
True and complete copies of all Pequot Contracts (or a true and complete
narrative description of any oral Pequot Contract) have previously been provided
to Parent. Except as set forth on Schedule 4.8 hereto, neither Pequot nor, to
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the knowledge of Pequot, any other party to any of the Pequot Contracts (x) is
in default under (nor does there exist any condition that, with notice or lapse
of time or both, would cause such a default under) any of the Pequot Contracts,
or (y) has waived any right it may have under any of the Pequot Contracts, the
waiver of which would have a material adverse effect on the business, assets or
financial condition or prospects of Pequot. All of the Pequot Contracts
constitute the valid and binding obligations of Pequot, enforceable in
accordance with their respective terms, and, to the knowledge of Pequot, of the
other parties thereto.
4.15 Directors and Officers. Schedule 4.15 hereto sets forth a list, as of
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the Closing Date, of the name of each director and officer of Pequot and the
position(s) held by each.
4.16 Payroll Information. Pequot has previously provided Parent with a true
and complete copy of the payroll report of Pequot dated September 11, 1998,
showing all current employees of Pequot and their current levels of
compensation, other than bonuses and other extraordinary compensation, all of
which bonuses and other extraordinary compensation are set forth in Schedule
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4.16 hereto. Pequot has paid all compensation required to be paid to employees
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of Pequot on or prior to the date hereof other than compensation (and bonuses
pursuant to arrangements described in Schedule 4.16) accrued in the current pay
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period.
4.17 Litigation. Except as set forth on Schedule 4.17 hereto, there is no
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suit, action, claim, investigation or proceeding pending or, to the knowledge of
Pequot, threatened against or affecting Pequot or the Pequot Business, nor is
there any judgment, decree, injunction or order of any applicable Governmental
Entity or arbitrator outstanding against Pequot.
4.18 Employee Benefit Plans/Labor Relations.
(a) Except as disclosed in Schedule 4.18 hereto, there are no employee
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benefit plans, agreements or arrangements maintained by Pequot, including (i)
"employee benefit plans" within the meaning of Section 3(3) of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA"); (ii) current or
deferred compensation, pension, profit sharing, vacation or severance plans or
programs; or (iii) medical, hospital, accident, disability or death benefit
plans (collectively, "Pequot Benefit Plans"). All Pequot Benefit Plans are
administered in accordance with, and are in material compliance with, all
applicable laws and regulations. No default exists with respect to the
obligations of Pequot under any Pequot Benefit Plan.
(b) Pequot is not a party to any collective bargaining agreement; no
collective bargaining agent has been certified as a representative of any of the
employees of Pequot; no representation campaign or election is now in progress
with respect to any employee of Pequot; and there are no labor disputes,
grievances, controversies, strikes or requests for union representation
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pending, or, to the knowledge of Pequot, threatened, relating to or affecting
the Pequot Business. To the knowledge of Pequot, no event has occurred that
could give rise to any such dispute, controversy, strike or request for
representation.
4.19 ERISA.
(a) All Pequot Benefit Plans that are subject to ERISA have been
administered in accordance with, and are in material compliance with, the
applicable provisions of ERISA. Each of the Pequot Benefit Plans that is
intended to meet the requirements of Section 401(a) of the Code has been
determined by the Internal Revenue Service to meet such requirements within the
meaning of such provision. No Pequot Benefit Plan is subject to Title IV of
ERISA or Section 412 of the Code. Pequot has not engaged in any nonexempt
"prohibited transactions," as such term is defined in Section 4975 of the Code
or Section 406 of ERISA, involving Pequot Benefit Plans that would subject
Pequot to the penalty or tax imposed under Section 502(i) of ERISA or Section
4975 of the Code. Pequot has not engaged in any transaction described in Section
4069 of ERISA within the last five years. Except as disclosed in Schedule 4.19
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hereto or pursuant to the terms of the Pequot Benefit Plans, neither the
execution and delivery hereof nor the consummation of the transactions
contemplated hereby will (i) result in any payment (including severance,
unemployment compensation or golden parachute) becoming due to any director or
other employee of Pequot, (ii) increase any benefit otherwise payable under any
Pequot Benefit Plan or (iii) result in the acceleration of the time of payment
or vesting of any such benefit to any extent.
(b) No notice of a "reportable event," within the meaning of Section 4043
of ERISA, for which the 30-day reporting requirement has not been waived, has
been required to be filed for any Pequot Benefit Plan that is an "employee
pension benefit plan" within the meaning of Section 3(2) of ERISA and that is
intended to meet the requirements of Section 401(a) of the Code, or by any
entity that is considered one employer with Pequot under Section 4001 of ERISA
or Section 414 of the Code, within the 12-month period ending on the Closing
Date. Pequot has not incurred any liability to the Pension Benefit Guaranty
Corporation in respect of any Pequot Benefit Plan that remains unpaid.
4.20 Taxes.
(a) Pequot has duly and timely filed all federal, state and local income,
franchise, excise, real and personal property and other tax returns and reports,
including extensions, required to have been filed by Pequot on or prior to the
Closing Date. Pequot has duly and timely paid all taxes and other governmental
charges, and all interest and penalties with respect thereto, required to be
paid by Pequot (whether by way of withholding or otherwise) to any federal,
state, local or other taxing authority (except to the extent the same are being
contested in good faith, and adequate reserves therefor have been provided in
the Pequot Financial Statements). As of the Closing Date, all deficiencies
proposed as a result of any audit have been paid or settled.
(b) Pequot is not a party to, or bound by, or otherwise in any way
obligated under, any tax sharing or similar agreement.
11
(c) Pequot has not consented to have the provisions of Section 341(f)(2)
of the Code (or comparable state law provisions) apply to it, and Pequot has not
agreed or been requested to make any adjustment under Section 481(c) of the Code
by reason of a change in accounting method or otherwise.
4.21 Compliance with Applicable Laws. Pequot holds all material permits,
licenses, variances, exemptions, orders and approvals of all Governmental
Entities necessary to own, lease or operate all of the assets and properties of
Pequot, as appropriate, and to carry on the Pequot Business as now conducted
(the "Pequot Permits"). To the knowledge of Pequot, Pequot is in material
compliance with all applicable laws, ordinances and regulations and the terms of
the Pequot Permits. Except as set forth on Schedule 4.21 hereto, all of the
-------------
Pequot Permits are fully assignable by Pequot in connection with the Merger.
Schedule 4.21 sets forth a true and complete list of all Pequot Permits, true
-------------
and complete copies of which have previously been provided to Parent.
4.22 Board of Directors/Shareholder Consent. Both the Board of Directors of
Pequot and the Pequot Shareholders have adopted and approved this Agreement and
the transactions contemplated hereby (including the Merger).
4.23 Brokers. Except as set forth on Schedule 4.23 hereto, no broker or
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finder is entitled to any broker's or finder's fee or other commission in
connection with the transactions contemplated hereby as a result of arrangements
made by or on behalf of Pequot.
4.24 Environmental Matters.
(a) To the knowledge of Pequot, no real property currently or formerly
owned or operated by Pequot is contaminated with any Hazardous Substance (as
hereinafter defined);
(b) Pequot is not a party to any litigation or administrative proceeding
nor, to the knowledge of Pequot, is any litigation or administrative proceeding
threatened against it, that, in either case, asserts or alleges that Pequot (i)
violated any Environmental Law (as hereinafter defined); (ii) is required to
clean up, remove or take remedial or other responsive action due to the
disposal, deposit, discharge, leak or other release of any Hazardous Substance;
or (iii) is required to pay all or a portion of the cost of any past, present or
future cleanup, removal or remedial or other action that arises out of or is
related to the disposal, deposit, discharge, leak or other release of any
Hazardous Substance.
(c) To the knowledge of Pequot, there are not now nor have there
previously been tanks or other facilities on, under, or at any real property
owned, leased, used or occupied by Pequot containing materials that, if known to
be present in soil or ground water, would require cleanup, removal or other
remedial action under Environmental Law.
(d) To the knowledge of Pequot, Pequot is not subject to any judgment,
order or citation related to or arising out of any Environmental Law and has not
been named or listed as a
12
potentially responsible party by any Governmental Entity in a matter related to
or arising out of any Environmental Law.
(e) For purposes hereof, (i) the term "Environmental Law" means any
federal, state or local law (including statutes, regulations, ordinances, codes,
rules, judicial opinions and other governmental restrictions and requirements)
relating to the discharge of air pollutants, water pollutants, noise, odors or
process waste water, or otherwise relating to the environment or hazardous or
toxic substances; and (ii) the term "Hazardous Substance" means any toxic or
hazardous substance that is regulated by or under authority of any Environmental
Law, including any petroleum products, asbestos or polychlorinated biphenyls.
4.25 Interest in Customers, Suppliers and Competitors. Except as provided
in Schedule 4.25 hereto, no officer, director, shareholder or employee of Pequot
-------------
and no family member (including a spouse, parent, sibling or lineal descendent
of any of the foregoing), has any direct or indirect material interest in any
material customer, supplier or competitor of Pequot, or in any Person from whom
or to whom Pequot leases any real or personal property, or in any other Person
with whom Pequot is doing business whether directly or indirectly (including as
a debtor or creditor), whether in existence as of the Closing Date or proposed,
other than the ownership of stock of publicly traded corporations.
4.26 Accounts Receivable. All accounts, notes, contracts and other
receivables of Pequot (collectively, "Pequot Accounts Receivable") were acquired
by Pequot in the ordinary course of business arising from bona fide
transactions. To the knowledge of Pequot, there are no set-offs, counterclaims
or disputes asserted with respect to any Pequot Accounts Receivable that would
result in claims in excess of the reserve for bad debts set forth on the Pequot
Financial Statements and, to the knowledge of Pequot and subject to such
reserve, all Pequot Accounts Receivable are collectible in full. Pequot has
previously provided Parent with a true and complete aging report prepared as of
June 30, 1998 which shows the time elapsed since invoice date for all Pequot
Accounts Receivable as of such date.
4.27 Accounts Payable. All material accounts, notes, contracts and other
amounts payable of Pequot (collectively, "Pequot Accounts Payable") are
currently within their respective terms, and are neither in default nor
otherwise past due by more than 90 days. Pequot has previously provided Parent
with a true and complete aging report prepared as of July 31, 1998 which shows
the time elapsed since invoice date for all Pequot Accounts Payable as of such
date.
4.28 Insurance. Pequot currently maintains, in full force and effect, all
insurance policies that are required to be maintained for the conduct of the
Pequot Business or the ownership of Pequot's property (both real and personal)
(collectively, the "Pequot Insurance Policies"). The Pequot Insurance Policies
are listed on Schedule 4.28 hereto, and true and complete copies of all Pequot
-------------
Insurance Policies have previously been provided to Parent. Pequot (a) is not
in default regarding the provisions of any Pequot Insurance Policy; (b) has paid
all premiums due thereunder; and (c) has not failed to present any notice or
material claim thereunder in a due and timely fashion.
13
4.29 Bankruptcy. Pequot has not filed a petition or request for
reorganization or protection or relief under the bankruptcy laws of the United
States or any state or territory thereof, made any general assignment for the
benefit of creditors, or consented to the appointment of a receiver or trustee,
including a custodian under the United States bankruptcy laws, whether such
receiver or trustee is appointed in a voluntary or involuntary proceeding.
4.30 Pequot Debt. As of the date hereof, the Pequot Debt is not in excess of
$44,345.
4.31 Accredited Investors; Investment Purpose. Each Pequot Shareholder
represents that he (a) is an "accredited investor" as such term is defined in
Rule 501 of Regulation D promulgated by the Securities and Exchange Commission
under the Securities Act of 1933, as amended (the "Securities Act"); (b) is
acquiring the Parent Stock solely for his own account for investment and not
with a view to, or for sale in connection with, any distribution thereof; and
(c) will not, directly or indirectly, offer, transfer, sell, pledge, hypothecate
or otherwise dispose of any Parent Stock (or solicit any offers to buy, purchase
or otherwise acquire or take a pledge of any such shares) except in compliance
with the Securities Act and the rules and regulations thereunder, other
applicable laws, rules and regulations, and the Second Amended and Restated
Stockholders' Agreement of Parent, dated December 17, 1997 (the "Stockholders'
Agreement").
4.32 Restrictions on Transfer. Each Pequot Shareholder acknowledges that (a)
the Parent Stock received by him hereunder has not been registered under the
Securities Act; (b) the Parent Stock may be required to be held indefinitely,
and he must continue to bear the economic risk of the investment in such shares
unless such shares are subsequently registered under the Securities Act or an
exemption from such registration is available; (c) there may not be any public
market for the Parent Stock in the foreseeable future; (d) Rule 144 promulgated
under the Securities Act is not presently available with respect to sales of any
securities of Parent, and such Rule is not anticipated to be available in the
foreseeable future; (e) when and if Parent Stock may be disposed of without
registration in reliance upon Rule 144, such disposition can be made only in
limited amounts and in accordance with the terms and conditions of such Rule;
(f) if the exemption afforded by Rule 144 is not available, sale without
registration will require the availability of an exemption under the Securities
Act; (g) the Parent Stock is subject to the terms and conditions of the
Stockholders' Agreement; (h) restrictive legends shall be placed on the
certificates representing Parent Stock; and (i) a notation shall be made in the
appropriate records of Parent indicating that Parent Stock is subject to
restrictions on transfer and, if Parent should in the future engage the services
of a stock transfer agent, appropriate stop-transfer instructions will be issued
to such transfer agent with respect to Parent Stock.
4.33 Ability to Bear Risk; Access to Information; Sophistication. Each
Pequot Shareholder represents and warrants that (a) his financial situation is
such that he can afford to bear the economic risk of holding Parent Stock
acquired by him hereunder for an indefinite period; (b) he can afford to suffer
the complete loss of such Parent Stock; (c) he has been granted the opportunity
to ask questions of, and receive answers from, representatives of Parent
concerning the terms and conditions of the Parent Stock and to obtain any
additional information that he deems necessary; (d) his knowledge and experience
in financial business matters is such that he is capable of evaluating the
merits and risk of ownership of the Parent Stock; (e) he has carefully reviewed
the
14
terms of the Stockholders' Agreement and has evaluated the restrictions and
obligations contained therein; and (f) he (i) has reviewed the Private Placement
Memorandum of Parent dated September 8, 1998, as amended (the "Memorandum"),
(ii) has carefully examined the Memorandum and has had an opportunity to ask
questions of, and receive answers from, representatives of Parent, and to obtain
additional information concerning Parent and its Subsidiaries (as hereinafter
defined), and (iii) does not require additional information regarding Parent or
its Subsidiaries in connection with the Merger.
4.34 Disclosure. No statement of fact by Pequot or any Pequot Shareholder
contained herein and no written statement of fact furnished by Pequot or any
Pequot Shareholder to Parent or Sub in connection herewith contains any untrue
statement of a material fact or omits to state a material fact necessary in
order to make the statements herein or therein contained not misleading.
4.35 Nature of Liabilities. Any unpaid legal, accounting or other fees of
Pequot are solely and directly related to the Merger.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF PARENT AND SUB
Each of Parent and Sub jointly and severally represents and warrants to Pequot
and the Pequot Shareholders, which representations and warranties shall survive
the Closing in accordance with Section 10.1 hereof, as follows:
5.1 Organization and Qualification. Each of Parent and its Subsidiaries (as
defined in Section 10.11 hereof) is a corporation duly organized, validly
existing and in good standing under the laws of the state of its incorporation.
Each of Parent and its Subsidiaries has the requisite corporate power and
authority to carry on its business as it is now being conducted and is duly
qualified or licensed to do business, and is in good standing, in each
jurisdiction where the character of its properties owned or held under lease or
the nature of its activities makes such qualification necessary. Complete and
correct copies of the Certificates of Incorporation and Bylaws of Parent and Sub
as in effect on the date hereof are attached, respectively, to a closing
certificate and incumbency certificate, substantially in the form of Exhibit "A-
----------
1" hereto ("Parent's Closing Certificate"), and to Sub's Closing Certificate.
--
5.2 Authority. Each of Parent and Sub has the necessary corporate power and
authority to execute and deliver this Agreement and to consummate the
transactions contemplated hereby. The execution and delivery hereof and the
consummation of the transactions contemplated hereby by each of Parent and Sub
have been duly and validly authorized and approved by their respective board of
directors and by Sub's sole shareholder, and no other corporate or shareholder
proceedings on the part of either Parent or Sub, or their respective board of
directors or shareholders, are necessary to authorize or approve this Agreement
or to consummate the transactions contemplated hereby. This Agreement has been
duly executed and delivered by each of Parent and Sub, and assuming the due
authorization, execution and delivery by Pequot and the Pequot Shareholders,
15
constitutes the valid and binding obligation of each of Parent and Sub,
enforceable against each of Parent and Sub in accordance with its terms,
subject, in each case, to bankruptcy, insolvency, reorganization, moratorium and
similar laws of general application relating to or affecting creditors' rights
and to general principles of equity, including principles of commercial
reasonableness, good faith and fair dealing.
5.3 No Conflicts, Required Filings and Consents. Except as set forth on
Schedule 5.3 hereto, none of the execution and delivery of this Agreement by
------------
Parent or Sub, the consummation by Parent and Sub of the transactions
contemplated hereby, or compliance by Parent and Sub with any of the provisions
hereof, will:
(a) conflict with or violate the Certificate of Incorporation or Bylaws
of Parent or Sub, or the organizational documents of any other Subsidiaries;
(b) result in a violation of any statute, ordinance, rule, regulation,
order, judgment or decree applicable to Parent or its Subsidiaries, or by which
Parent, any of its Subsidiaries, or their respective properties or assets may be
bound or affected;
(c) result in a violation or breach of, or constitute a default (or an
event that, with notice or lapse of time or both, would become a default) under,
or give to others any rights of termination, amendment, acceleration or
cancellation of, any note, bond, mortgage, indenture, or any material contract,
agreement, arrangement, lease, license, permit, judgment, decree, franchise or
other instrument or obligation to which Parent or any of its Subsidiaries is a
party or by which Parent, any of its Subsidiaries or their respective properties
may be bound or affected;
(d) result in the creation of any Lien on any of the property or assets
of Parent or any of its Subsidiaries; or
(e) require any Consent of (i) any Governmental Entity (except for (x)
compliance with any applicable requirements of any applicable securities laws,
and (y) the filing of the Certificate of Merger pursuant to the DGCL and the
CBCA); or (ii) any other Person.
5.4 Litigation. Except as set forth on Schedule 5.4 hereto, there is no
------------
suit, action, claim, investigation or proceeding pending or, to the knowledge of
Parent, threatened against or affecting Parent or its Subsidiaries, nor is there
any judgment, decree, injunction or order of any applicable Governmental Entity
or arbitrator outstanding against Parent or its Subsidiaries that, either
individually or in the aggregate, would have a material adverse effect on the
assets, business or financial condition of Parent and its Subsidiaries, taken as
a whole.
5.5 Brokers. Except as disclosed on Schedule 5.5 hereto, no broker or finder
------------
is entitled to any broker's or finder's fee in connection with the transactions
contemplated hereby based upon arrangements made by or on behalf of Parent or
Sub.
5.6 Parent Stock.
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(a) As of the date hereof the authorized capital stock of Parent consists
of (i) (A) 75,000,000 shares of Class A Common Stock, $.01 par value, of which
no shares are validly issued and outstanding, and (B) 100,000,000 shares of
Class B Common Stock, $.01 par value, of which 14,053,489 shares are validly
issued and outstanding (without taking into account any shares of Parent Stock
to be issued pursuant hereto, and excluding the potential acquisitions of Two-
Way Communications, L.L.C., Pantheon Interactive, Inc., NetResponse L.L.C. and
Ionix Development Corporation), fully paid and nonassessable; (ii) 750,000
shares of blank check preferred stock, (A) 250,000 of which have been designated
as Class A Convertible Preferred Stock, of which 176,291 shares are validly
issued and outstanding, fully paid and nonassessable, (B) 200,000 of which have
been designated as Class B Convertible Preferred Stock, of which 98,767 shares
are validly issued and outstanding, fully paid and nonassessable, (C) 15,000 of
which have been designated as Class C Convertible Preferred Stock, of which
9,232 shares are validly issued and outstanding, fully paid and nonassessable,
and (D) 50,000 of which have been designated as Class D Nonvoting Preferred
Stock, of which 35,700 shares are validly issued and outstanding, fully paid and
nonassessable. Except as set forth on Schedule 5.6 hereto, there are no options,
------------
warrants, calls, agreements, commitments or other rights presently outstanding
that would obligate Parent to issue, deliver or sell shares of its capital
stock, or to grant, extend or enter into any such option, warrant, call,
agreement, commitment or other right (excluding the same potential acquisitions
as referred to above). In addition to the foregoing, as of the Closing Date,
Parent has no bonds, debentures, notes or other indebtedness issued or
outstanding that have voting rights in Parent.
(b) When delivered to the Pequot Shareholders in accordance with the
terms hereof, the Parent Stock will be (i) duly authorized, fully paid and
nonassessable, and (ii) free and clear of all Liens other than restrictions
imposed by the Stockholders' Agreement and by federal and state securities laws.
5.7 Subsidiaries. Except as set forth on Schedule 5.7 hereto, Parent has no
------------
subsidiaries and does not otherwise own or control, directly or indirectly, any
equity interest in, or any security convertible into an equity interest in, any
Entity. Schedule 5.7 lists the name of each of the Subsidiaries of Parent, and
------------
indicates their respective jurisdictions of incorporation.
5.8 Financial Statements. Parent has heretofore furnished Pequot with a true
and complete copy of (a) the audited financial statements of iXL Interactive
Excellence, Inc. (n/k/a iXL, Inc.) for the years ended December 31, 1993, 1994
and 1995, and for the four month period ended April 30, 1996; (b) the audited
combined financial statements for Creative Video, Inc. (n/k/a iXL, Inc.),
Creative Video Library, Inc. and Entrepreneur Television, Inc. for the years
ended December 31, 1993, 1994 and 1995, and for the four month period ended
April 30, 1996; (c) the audited consolidated financial statements for Parent and
its Subsidiaries for the eight months ended December 31, 1996 and for the year
ended December 31, 1997; and (d) the unaudited consolidated financial statements
for Parent and its Subsidiaries for the three month period ended June 30, 1998
(all of the foregoing, collectively, "Parent Financial Statements"). The Parent
Financial Statements present fairly in all material respects the consolidated
financial position, results of operations, shareholders' equity and cash flow of
Parent at the respective dates or for the respective periods to which they
apply. Except as disclosed therein, such statements
17
and related notes have been prepared in accordance with GAAP consistently
applied throughout the periods involved (except, in the case of the unaudited
financial statements, for the exclusion of footnotes and normal year-end
adjustments).
5.9 Undisclosed Liabilities. Except as set forth on Schedule 5.9 hereto,
------------
neither Parent nor any of its Subsidiaries has any debt, liability or obligation
of any kind, whether accrued, absolute or otherwise, including any liability or
obligation on account of taxes or any governmental charges or penalty, interest
or fines, except (a) liabilities incurred in the ordinary course of business
after June 30, 1998 that would not, whether individually or in the aggregate,
have a material adverse impact on the business or financial condition of Parent
and its Subsidiaries, taken as a whole; (b) liabilities reflected on the Parent
Financial Statements; and (c) liabilities incurred as a result of the
transactions contemplated hereby.
5.10 Compliance with Applicable Laws. Parent or its Subsidiaries hold all
material permits, licenses, variances, exemptions, orders and approvals of all
Governmental Entities necessary to own, lease or operate all of the assets and
properties of Parent and its Subsidiaries, as appropriate, and to carry on
Parent's business as now conducted (the "Parent Permits"). To the knowledge of
Parent, Parent and its Subsidiaries are in material compliance with all
applicable laws, ordinances and regulations and the terms of the Parent Permits.
5.11 Board of Directors/Shareholder Consent. The board of directors of
Parent, and both the board of directors and shareholder of Sub, have, by
unanimous written consent or other action, adopted and approved this Agreement
and the transactions contemplated hereby (including the Merger).
5.12 Bankruptcy. Neither Parent nor any of its Subsidiaries has filed a
petition or request for reorganization or protection or relief under the
bankruptcy laws of the United States or any state or territory thereof, made any
general assignment for the benefit of creditors, or consented to the appointment
of a receiver or trustee, including a custodian under the United States
bankruptcy laws, whether such receiver or trustee is appointed in a voluntary or
involuntary proceeding.
5.13 Absence of Changes. Except as provided in Schedule 5.13 hereto, since
-------------
June 30, 1998, there has not been (a) any transaction, commitment, dispute or
other event or condition (financial or otherwise) of any character (whether or
not in the ordinary course of business) individually or in the aggregate that
has had, or would reasonably be expected to have, a material adverse effect on
the business, properties, assets, condition (financial or otherwise),
liabilities or results of operations of Parent and its Subsidiaries, taken as a
whole; (b) any damage, destruction or loss, whether or not covered by insurance,
which has had, or would reasonably be expected to have, a material adverse
effect on the business, properties, assets, condition (financial or otherwise),
liabilities or results of operations of Parent and its Subsidiaries, taken as a
whole; (c) any entry into any commitment or transaction material to Parent and
its Subsidiaries, taken as a whole (including any borrowing or sale of assets)
except in the ordinary course of business consistent with past practice; (d) any
declaration, setting aside or payment of any dividend or distribution (whether
in cash, stock or property) with respect to Parent's capital stock; (e) any
18
material change in Parent's accounting principles, practices or methods; (f) any
split, combination or reclassification of any of Parent's capital stock, or the
issuance or authorization of any issuance of any other securities in respect of,
in lieu of or in substitution for, shares of Parent's capital stock; or (g) any
agreement (whether or not in writing), arrangement or understanding to do any of
the foregoing.
5.14 Taxes. Parent and its Subsidiaries have duly and timely filed all
federal, state and local income, franchise, excise, real and personal property
and other tax returns and reports, including extensions, required to have been
filed by Parent and its Subsidiaries on or prior to the Closing Date. Parent
and its Subsidiaries have duly and timely paid all taxes and other governmental
charges, and all interest and penalties with respect thereto, required to be
paid by Parent and its Subsidiaries (whether by way of withholding or otherwise)
to any federal, state, local or other taxing authority (except to the extent the
same are being contested in good faith, and adequate reserves therefor have been
provided in the applicable Parent Financial Statement). As of the Closing Date,
all deficiencies proposed as a result of any audits have been paid or settled.
5.15 Disclosure. No statement of fact by Parent or Sub contained herein and
no written statement of fact furnished or to be furnished by Parent or Sub to
Pequot in connection herewith contains or will contain any untrue statement of a
material fact or omits or will omit to state a material fact necessary in order
to make the statements herein or therein contained not misleading.
5.16 Section 368 of the Code.
(a) At all times prior to the Merger, Parent has owned all of the
outstanding equity interests in Sub (including rights to acquire an equity
interest in Sub, if any). Accordingly, both prior to and immediately after the
Merger, Parent will be in control of Sub within the meaning of Section 368(c) of
the Code. "Control" for these purposes means the ownership of stock possessing
at least eighty percent (80%) of the total combined voting power of all classes
of stock entitled to vote and at least eighty percent (80%) of the total number
of shares of each class of nonvoting stock. Following the Merger, Parent has no
plan or intention to cause Sub to issue additional equity interests that would
result in Parent losing "Control," as defined above, of Sub.
(b) After the Merger, Parent will own 100% of the outstanding equity
interest in Sub (including the right to acquire such an equity interest). Parent
has no plan or intention to liquidate Sub, to merge Sub with or into another
operation (including Parent), to sell, transfer ownership, or otherwise dispose
of the stock of Sub or transfer any portion of its assets (including those
assets acquired from Pequot) to any person or entity (including Parent), except
for dispositions made in the ordinary course of business or transfers of assets
to a corporation controlled by Sub (including payments to dissenters
("Permissible Transfers").
(c) Parent intends that, following the Merger, it will cause Sub either
to continue Pequot's historic business or to continue to use a significant
portion of Pequot's historic business assets in a business; provided, however,
to the extent that the business or assets of
19
Pequot are subject to a Permissible Transfer, Parent intends that the transferee
will continue the historic business of Pequot or use a significant portion of
Pequot's assets in a business.
(d) Neither Parent nor Sub is an "investment company" as defined in
Section 368(a)(2)(F)(iii) and (iv) of the Code.
(e) Neither Parent nor Sub is under the jurisdiction of a court in a
Title 11 or similar case within the meaning of Section 368 (a)(3)(A) of the
Code.
(f) Sub will acquire at least 90% of the fair market value of the net
assets and at least 70% of the fair market value of the gross assets held by
Pequot immediately prior to the Merger.
(g) Parent and Sub will pay their respective expenses incurred in
connection with the Merger.
(h) There is no intercorporate indebtedness existing between Parent and
Pequot or between Sub and Pequot that was issued or acquired, or will be
settled, at a discount.
(i) No stock of Sub will be issued in the Merger.
ARTICLE VI
ADDITIONAL AGREEMENTS
6.1 Conduct of Business by Pequot Pending the Merger. From and after the
date hereof, prior to the Effective Time, except as contemplated hereby, unless
Parent shall otherwise agree in writing, Pequot shall carry on its business in
the usual, regular and ordinary course in substantially the same manner as
heretofore conducted, use reasonable efforts to preserve intact its present
business organization, keep available the services of its employees and preserve
its relationships with customers, suppliers, licensors, licensees, distributors
and others having business dealings with Pequot to the end that its goodwill and
on-going businesses shall not be impaired in any material respect at the
Effective Time. Without limiting the generality of the foregoing, and except as
contemplated hereby, unless Parent shall otherwise agree in writing, prior to
the Effective Time, Pequot shall not, directly or indirectly:
(a) (i) declare, set aside, or pay any dividend on, or make any other
distribution in respect of, any of its capital stock, (ii) split, combine or
reclassify any of its capital stock, or issue or authorize the issuance of any
other securities in respect of, in lieu of or in substitution for, shares of its
capital stock, or (iii) purchase, redeem or otherwise acquire, any share of
capital stock of Pequot or any other equity security thereof or any right,
warrant, or option to acquire any such share or other security;
20
(b) issue, deliver, sell, pledge or otherwise encumber any share of its
capital stock, any other voting security issued by Pequot or any security
convertible into, or any right, warrant or option to acquire any such share or
voting security;
(c) amend its Certificate of Incorporation, Bylaws or other comparable
organizational documents;
(d) acquire or agree to acquire (i) by merging or consolidating with, or
by purchasing a substantial portion of the assets of, or by any other manner,
any business or any Entity or division thereof, or (ii) any assets that are
material, individually or in the aggregate, to Pequot;
(e) subject to a Lien or sell, lease or otherwise dispose of any of its
properties or assets;
(f) incur any indebtedness for borrowed money or guarantee any such
indebtedness of another Person or issue or sell any debt security of Pequot,
guarantee any debt security of another Person or enter into any "keep well" or
other agreement to maintain the financial condition of another Person, make any
loan, advance or capital contribution to, or investment in, any other Person, or
settle or compromise any material claim or litigation; or
(g) authorize any of, or commit or agree to take any of, the foregoing
actions.
6.2 Access to Information. From the date hereof through the Effective Time,
each of Pequot and Parent shall afford to the other of them and the other's
accountants, counsel and other representatives reasonable access during normal
business hours (and at such other times as the parties may mutually agree) upon
reasonable prior notice and approval, which shall not be unreasonably withheld,
to its properties, books, contracts, commitments, records and personnel and,
during such period, shall furnish promptly to the other of them all information
concerning its business, properties and personnel as the other may reasonably
request. Parent and Pequot, and their respective accountants, counsel and other
representatives, shall, in the exercise of the rights described in this Section
6.2, not unduly interfere with the operation of the business of the other of
them.
6.3 Filings; Tax Elections. Pequot shall promptly provide Parent with copies
of all filings made by Pequot with any Governmental Entity in connection
herewith and the transactions contemplated hereby. Pequot shall, before
settling or compromising any material income tax liability of Pequot, consult
with Parent and its advisors as to the positions and elections that will be
taken or made with respect to such matter.
6.4 Public Announcements. The parties agree that, except as may otherwise be
required to comply with applicable laws and regulations (including applicable
securities laws) or to obtain consents required hereunder, public disclosure of
the transactions contemplated hereby shall be made only upon or after the
consummation of the Merger. Any such disclosure shall be coordinated by Parent,
and none of the Pequot Shareholders shall make any such disclosure without the
prior written consent of Parent.
21
6.5 Transfer and Gains Taxes and Certain Other Taxes and Expenses. Parent
agrees that, to the extent it is legally able to do so, the Surviving
Corporation will pay all real property transfer, gains and other similar taxes
and all documentary stamps, filing fees, recording fees and sales and use taxes,
if any, and any penalties or interest with respect thereto, payable in
connection with consummation of the Merger.
6.6 Options. Parent hereby covenants and agrees that at or (in Pequot's
discretion) within three months after the Closing Date it will issue options to
purchase an aggregate of 60,000 shares of Parent Stock to such non-management
employees of Pequot (after Closing, of the Surviving Corporation) as designated
by Pequot and approved by Parent, which approval shall not be withheld
unreasonably, at an exercise price of $10 per share, all in the form of Exhibit
-------
"C" hereto ("Options") and subject to Parent's standard five-year vesting
---
schedule and Parent's 1996 Stock Option Plan, as amended. Schedule 6.6 hereto
------------
will include the name of each such option recipient, the number of shares and
whether the Option is to be granted at the Closing or at a specified date within
three months thereafter.
6.7 Further Assurances. From time to time after the Effective Time, upon the
reasonable request of any party hereto, the other party or parties hereto shall
execute and deliver or cause to be executed and delivered such further
instruments, and take such further action, as the requesting party may
reasonably request in order to effectuate fully the purposes, terms and
conditions hereof.
6.8 Use of Certain Names. When the Certificate of Merger has been accepted
for filing by the Secretary of State of Delaware and Connecticut, respectively,
Pequot, Parent and Sub will discontinue use of the "Pequot," "Pequot Systems"
and "Quotewave" names and any variants thereof, including use as service marks,
trademarks or trade names, except that they may make incidental use of the names
"Pequot" and "Pequot Systems" for a commercially reasonable period of time
internally, and to aid in post-Closing transition.
ARTICLE VII
CONDITIONS PRECEDENT
7.1 Conditions to Obligation of Pequot and the Pequot Shareholders to Effect
the Merger. The obligations of Pequot and the Pequot Shareholders to effect the
Merger shall be subject to the fulfillment at or prior to the Effective Time of
the following conditions:
(a) Parent and Sub shall have performed in all material respects their
respective agreements contained herein required to be performed at or prior to
the Effective Time, and the representations and warranties of Parent and Sub
contained herein shall be true when made and (except for representations and
warranties made as of a specified date, which need only be true as of such date)
at and as of the Effective Time as if made at and as of such time, except as
contemplated hereby;
22
(b) (i) the appropriate officers of Parent shall have executed and
delivered to Pequot at the Closing, Parent's Closing Certificate, and (ii) the
appropriate officers of Sub shall have executed and delivered to Pequot at the
Closing, Sub's Closing Certificate;
(c) Parent shall have obtained all of the Consents, if any, listed on
Schedule 7.1(c) hereto;
---------------
(d) Pequot shall have received corporate certificates of good standing
for Parent and Sub, and a copy of the Certificate of Incorporation for Parent
and Sub, respectively, both as certified by the Secretary of State of Delaware;
(e) there shall have been delivered to each of the Pequot Shareholders at
the Closing, duly executed by Parent, an Agreement to be Bound to the
Registration Rights Agreement of Parent, dated as of Closing Date (the
"Agreement to be Bound to the Registration Rights Agreement"), in the form of
Exhibit "B" hereto;
----------
(f) Parent shall have executed and delivered at the Closing an Option
Agreement in the form of Exhibit "C" hereto for each of the Persons listed on
----------
Schedule 6.6 hereto as receiving options to purchase Parent Stock at that time;
------------
(g) Pequot shall have received, at the Closing, a duly executed opinion
of counsel to Parent and Sub, substantially in the form of Exhibit "D" hereto;
----------
and
(h) Pequot shall have received from Parent and Sub such other documents
as Pequot's counsel shall have reasonably requested, in form and substance
reasonably satisfactory to Pequot's counsel.
7.2 Conditions to Obligations of Parent and Sub to Effect the Merger. The
obligations of Parent and Sub to effect the Merger shall be subject to the
fulfillment, at or prior to the Effective Time, of the following conditions:
(a) Pequot and the Pequot Shareholders shall have performed in all
material respects their respective agreements contained herein required to be
performed at or prior to the Effective Time, and the representations and
warranties of Pequot and the Pequot Shareholders contained herein shall be true
when made and (except for representations and warranties made as of a specified
date, which need only be true as of such date) at and as of the Effective Time
as if made at and as of such time, except as contemplated hereby;
(b) the appropriate officers of Pequot shall have executed and delivered
to Parent at the Closing, Pequot's Closing Certificate.
(c) Pequot and the Pequot Shareholders shall have obtained or caused to
be obtained all of the Consents, if any, listed on Schedule 7.2(c) hereto;
---------------
23
(d) there shall have been delivered to Parent at the Closing, duly
executed by each of the Pequot Shareholders, (i) an Agreement to be Bound to the
Stockholders' Agreement, substantially in the form of Exhibit "F" hereto; and
-----------
(ii) an Agreement to be Bound to the Registration Rights Agreement;
(e) Parent shall have received a certificate of existence for Pequot, and
a copy of the Certificate of Incorporation of Pequot, both as certified by the
Secretary of State of Connecticut;
(f) as of the date three business days prior to the Closing Date the
Pequot Debt shall be no greater than $44,345;
(g) Each Person to receive Options at the Closing shall have executed and
delivered an Option Agreement;
(h) Parent shall have received, at the Closing, a duly executed opinion
of counsel to Pequot and the Pequot Shareholders, substantially in the form of
Exhibit "G" hereto;
-----------
(i) Parent shall have received from Pequot or the Pequot Shareholders, as
the case may be, such other documents as Parent's counsel shall have reasonably
requested, in form and substance reasonably satisfactory to Parent's counsel;
and
(j) Parent shall have received evidence satisfactory to it that at the
Closing the assets and properties used in the Pequot Business are free and clear
of all Liens other than Permitted Liens (as hereinafter defined), and that all
Pequot Shareholders are accredited investors in accordance with Section 4.31(a)
hereof.
ARTICLE VIII
INDEMNIFICATION
8.1 Indemnification by Parent.
(a) Parent shall indemnify and hold the Pequot Shareholders and Pequot's
directors, officers and employees (collectively, the "Pequot Indemnified
Parties") harmless from and against, and agree promptly to defend each of the
Pequot Indemnified Parties from and reimburse each of the Pequot Indemnified
Parties for, any and all losses, damages, costs, expenses, liabilities,
obligations and claims of any kind (including reasonable attorney fees and other
legal costs and expenses) (collectively, a "Pequot Loss") that any of the Pequot
Indemnified Parties may at any time suffer or incur, or become subject to, as a
result of or in connection with:
(i) any breach or inaccuracy of any of the representations and
warranties made by Parent or Sub in or pursuant hereto, or in any instrument,
certificate or affidavit delivered by Parent or Sub at the Closing in accordance
with the provisions hereof;
24
(ii) any failure by Parent or Sub to carry out, perform, satisfy and
discharge any of its respective covenants, agreements, undertakings, liabilities
or obligations hereunder or under any of the documents and materials delivered
by Parent pursuant hereto; and
(iii) any suit, action or other proceeding arising out of, or in any
way related to, any of the matters referred to in this Section 8.1(a).
(b) Notwithstanding any other provision hereof to the contrary, Parent
shall not have any liability under Section 8.1(a)(i) above (i) unless the
aggregate of all Pequot Losses for which Parent would be liable but for this
sentence exceeds, on a cumulative basis, an amount equal to $100,000, and then
only to the extent of such excess, (ii) for amounts in excess of $4,500,000 in
the aggregate, and (iii) unless the Pequot Shareholders have asserted a claim
with respect to the matters set forth in Section 8.1(a)(i), or 8.1(a)(iii) to
the extent applicable to Section 8.1(a)(i), within the longer of (A) the
applicable statute of limitations or (B) two years of the Effective Time.
Notwithstanding any implication to the contrary contained herein, the parties
acknowledge and agree that a decrease in the value of Parent Stock would not, by
itself, constitute a Pequot Loss, unless and to the extent a decrease in the
value of Parent Stock has been demonstrated to be as a result of any event
described in Sections 8.1(a)(i), (ii) or (iii) above.
8.2 Indemnification by the Pequot Shareholders.
(a) The Pequot Shareholders, jointly and severally, shall indemnify and
hold Parent, Sub, Surviving Corporation and their respective shareholders,
directors, officers and employees (collectively, the "Parent Indemnified
Parties") harmless from and against, and agree to defend promptly each of the
Parent Indemnified Parties from and reimburse each of the Parent Indemnified
Parties for, any and all losses, damages, costs, expenses, liabilities,
obligations and claims of any kind (including reasonable attorneys' fees and
other legal costs and expenses) (collectively, a "Parent Loss") that any of the
Parent Indemnified Parties may at any time suffer or incur, or become subject
to, as a result of or in connection with:
(i) any breach or inaccuracy of any of the representations and
warranties made by Pequot or the Pequot Shareholders in or pursuant hereto, or
in any instrument certificate or affidavit delivered by any of the same at the
Closing in accordance with the provisions hereof;
(ii) any failure by Pequot or any of the Pequot Shareholders to carry
out, perform, satisfy and discharge any of their respective covenants,
agreements, undertakings, liabilities or obligations hereunder or under any of
the documents and materials delivered by Pequot pursuant hereto; and
(iii) any suit, action or other proceeding arising out of, or in any
way related to, any of the matters referred to in this Section 8.2.
25
(b) Notwithstanding the above, none of the Pequot Shareholders shall
have any liability under Section 8.2(a)(i) above (i) unless the aggregate of all
Parent Losses for which the Pequot Shareholders would be liable but for this
sentence exceeds, on a cumulative basis, an amount equal to $100,000, and then
only to the extent of such excess, (ii) for amounts in excess of $4,500,000 in
the aggregate, and (iii) unless Parent has asserted a claim with respect to the
matters set forth in Sections 8.2(a)(i), or 8.2(a)(iii) to the extent applicable
to Section 8.2(a)(i) within the longer of (A) the applicable statute of
limitations or (B) two years of the Effective Time, except with respect to the
matters arising under Sections 4.18, 4.19, 4.20 or 4.24 hereof, in which event
Parent must have asserted a claim within the applicable statute of limitations.
Notwithstanding any implication to the contrary contained herein, the parties
acknowledge and agree that a decrease in the value of Parent Stock would not, by
itself, constitute a Parent Loss, unless and to the extent a decrease in the
value of Parent Stock has been demonstrated to be as a result of any event
described in Sections 8.2(a)(i), (ii) or (iii) above.
(c) Notwithstanding the above, except for claims for indemnification
based on (i) fraud, (ii) intentional misrepresentation or (iii) any breach of
any representation made in Section 4.3 hereof, or otherwise with respect to
title to Pequot Stock or any Pequot Stock Rights, the liability of each of the
Pequot Shareholders under Section 8.2(a) hereof will not exceed his or her
respective portion of the Merger consideration receivable hereunder, as
determined by multiplying by $10 the number of shares of Parent Stock, issued to
them pursuant to Section 3.1(b)(i) hereof and by adding the amount of cash paid
to them pursuant to Section 3.1(b)(ii) hereof.
8.3 Notification of Claims; Election to Defend
(a) A party entitled to be indemnified pursuant to Section 8.1 or 8.2
hereof, as the case may be (the "Indemnified Party"), shall notify the party
liable for such indemnification (the "Indemnifying Party") in writing of any
claim or demand (a "Claim") that the Indemnified Party has determined has given
or could give rise to a right of indemnification hereunder. Subject to the
Indemnifying Party's right to defend in good faith third party claims as
hereinafter provided, the Indemnifying Party shall satisfy its obligations under
this Article VIII within 30 days after the receipt of written notice thereof
from the Indemnified Party. Any amounts paid thereafter shall include interest
thereon for the period commencing at the end of such 30-day period and ending on
the actual date of payment, at a rate of 15% per annum, or, if lower, at the
highest rate of interest permitted by applicable law at the time of such
payment.
(b) If the Indemnified Party shall notify the Indemnifying Party of any
Claim pursuant to Section 8.3(a) hereof, and if such Claim relates to a Claim
asserted by a third party against the Indemnified Party that the Indemnifying
Party acknowledges is a Claim for which it must indemnify or hold harmless the
Indemnified Party under Section 8.1 or 8.2 hereof, as the case may be, the
Indemnifying Party shall have the right, at its sole cost and expense, to employ
counsel of its own choosing to defend any such Claim asserted against the
Indemnified Party. Notwithstanding anything to the contrary in the preceding
sentence, if the Indemnified Party (i) reasonably believes that its interests
with respect to a Claim (or any material portion thereof) are in conflict with
the interests of the Indemnifying Party with respect to such Claim (or portion
thereof), and (ii) promptly notifies the Indemnifying Party, in writing, of the
nature of such conflict, then the
26
Indemnified Party shall be entitled to choose, at the sole cost and expense of
the Indemnifying Party, independent counsel to defend such Claim (or the
conflicting portion thereof). The Indemnified Party shall have the right to
participate in the defense of any Claim at its own expense (except to the extent
provided in the preceding sentence), but the Indemnifying Party shall retain
control over such litigation (except as provided in the preceding sentence). The
Indemnifying Party shall notify the Indemnified Party in writing, as promptly as
possible (but in any case before the due date for the answer or response to a
Claim) after receipt of the notice of Claim given by the Indemnified Party to
the Indemnifying Party under Section 8.3(a) hereof, of its election to defend in
good faith any such third party Claim. For so long as the Indemnifying Party is
defending in good faith any such Claim asserted by a third party against the
Indemnified Party, the Indemnified Party shall not settle or compromise such
Claim without the prior written consent of the Indemnifying Party. The
Indemnified Party shall cooperate with the Indemnifying Party in connection with
any such defense and shall make available to the Indemnifying Party or its
agents all records and other materials in the Indemnified Party's possession
reasonably required by it for its use in contesting any third party Claim;
provided, however, that the Indemnifying Party shall have agreed, in writing, to
keep such records and other materials confidential except (i) to the extent
required for defense of the relevant Claim, or (ii) as required by law or court
order. Whether or not the Indemnifying Party elects to defend any such Claim,
the Indemnified Party shall have no obligations to do so. Within 30 days after a
final determination (including a settlement) has been reached with respect to
any Claim contested pursuant to this Section 8.3(b), the Indemnifying Party
shall satisfy its obligations hereunder with respect thereto. Any amount paid
thereafter shall include interest thereon for the period commencing at the end
of such 30-day period and ending on the actual date of payment, at a rate of 15%
per annum, or, if lower, at the highest rate of interest permitted by applicable
law at the time of such payment.
8.4 Payment. Any Indemnifying Party may, at such Indemnifying Party's
option, pay all or part of any amount due under this Article VIII by delivery of
shares of Parent Stock having a value equal to the amount due (to the extent
that such Indemnifying Party owns sufficient shares of Parent Stock); provided,
however, that any Pequot Indemnifying Party may do so only after satisfying any
such amount due to the extent of any cash received by them as Merger
consideration hereunder. For the purpose of this provision, the value of Parent
Stock shall be deemed to be $10 per share.
ARTICLE IX
TERMINATION, AMENDMENT AND WAIVER
9.1 Termination. This Merger Agreement may be terminated at any time prior
to the Effective Time:
(a) by mutual written consent of Parent and Pequot;
27
(b) by Pequot, upon a material breach hereof on the part of Parent or Sub
which has not been cured and which would cause any condition set forth in
Section 7.1 hereof to be incapable of being satisfied by September 30, 1998;
(c) by Parent, upon a material breach hereof on the part of Pequot or any
of the Pequot Shareholders which has not been cured and which would cause any
condition set forth in Section 7.2 hereof to be incapable of being satisfied by
September 30, 1998;
(d) by Parent or Pequot if any court of competent jurisdiction shall have
issued, enacted, entered, promulgated or enforced any order, judgment, decree,
injunction or ruling which restrains, enjoins or otherwise prohibits the Merger
and such order, judgment, decree, injunction or ruling shall have become final
and nonappealable; or
(e) by either Parent or Pequot if the Merger shall not have been
consummated on or before September 30, 1998 (provided the terminating party is
not otherwise in material breach of its representations, warranties or
obligations hereunder).
9.2 Fees and Expenses.
(a) If the Merger is consummated, all costs and expenses incurred in
connection herewith and the transactions contemplated hereby shall be paid by
the Surviving Corporation; provided, however, that the Pequot Shareholders shall
pay all fees and expenses (including agents, counsel and other advisors) of
Pequot and themselves that are (i) not solely and directly related to the Merger
and (ii) all other such fees and expenses in excess of $75,000. The Surviving
Corporation will pay, at the Closing, $75,000 of such fees and expenses,
provided that they are solely and directly related to the Merger.
(b) If the Merger is not consummated for a reason other than the willful
and material breach hereof by a party, all fees and expenses incurred in
connection herewith and the transactions contemplated hereby shall be paid by
the party incurring such fees or expenses.
(c) If the Merger is not consummated because of a willful and material
breach hereof by any party, the nonbreaching party or parties shall be entitled
to pursue all legal and equitable remedies against the breaching party for such
breach including specific performance and all fees and expenses incurred by the
nonbreaching party or parties in connection with enforcing its or their rights
hereunder with respect to such breach shall be paid by the breaching party.
9.3 Amendment. This Merger Agreement may be amended by Parent, Sub, Pequot
and the Pequot Shareholders at any time before or after approval hereof by the
Pequot Shareholders, but, after such approval, no amendment shall be made which
(i) changes the form or decreases the amount of the consideration to be received
in the Merger, (ii) in any way materially adversely affects the rights of the
Pequot Shareholders, or (iii) under applicable law would require approval of the
Pequot Shareholders, in any such case referred to in clauses (i), (ii) and
(iii), without the further approval of the Pequot Shareholders. This Agreement
may not be amended except by an instrument in writing signed on behalf of the
parties hereto, provided that after the
28
Effective Time, any such amendment must be signed by the former holders of a
majority of the Pequot Stock.
9.4 Waiver. At any time prior to the Effective Time, the parties hereto may,
to the extent permitted by applicable law, (i) extend the time for the
performance of any of the obligations or other acts of any other party hereto,
(ii) waive any inaccuracies in the representations and warranties by any other
party contained herein or in any documents delivered by any other party pursuant
hereto and (iii) waive compliance with any of the agreements of any other party
or with any conditions to its own obligations contained herein. Any agreement
on the part of a party hereto to any such extension or waiver shall be valid
only if set forth in an instrument in writing signed on behalf of such party.
ARTICLE X
GENERAL PROVISIONS
10.1 Survival; Recourse. None of the agreements contained herein shall
survive the Merger, except that (i) the agreements contained in Article III
hereof, the covenants contained in Article VI hereof, the obligations to
indemnify contained in Article VIII hereof and the agreements of the Surviving
Corporation referred to in Sections 10.9 and 10.10 hereof, shall survive the
Merger indefinitely (except to the extent a shorter period of time is explicitly
specified therein) and (ii) the representations and warranties made in Articles
IV and V hereof shall survive the Merger, and shall survive any independent
investigation by the parties, and any dissolution, merger or consolidation of
Pequot or Parent, and shall bind the legal representatives, assigns and
successors of Pequot, the Pequot Shareholders and Parent, for a period of two
years after the Closing Date (other than the representations and warranties
contained in Sections 4.18, 4.19, 4.20 and 4.24 hereof, which shall survive for
the applicable statute of limitations).
10.2 Notices. All notices or other communications under this Agreement shall
be in writing and shall be given (and shall be deemed to have been duly given
upon receipt) by delivery in Person, by telecopy (with confirmation of receipt),
or by registered or certified mail, postage prepaid, return receipt requested,
addressed as follows:
If to Pequot : Pequot Systems, Inc.
▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇. ▇▇▇▇▇▇ ▇▇▇▇▇▇, President
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
With a copy to: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
29
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
If to the Pequot To the address listed under the signature
Shareholders: line of the applicable Pequot Shareholder
If to Parent or Sub: IXL Holdings, Inc.
▇▇▇▇ ▇▇▇▇▇ ▇▇., ▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Telecopy: 404/267-3801
Telephone: 404/▇▇▇-▇▇▇▇
With copies to: ▇▇▇▇▇▇ & ▇▇▇▇▇▇, A Professional Corporation
One Buckhead Plaza
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇., ▇▇▇. ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, Esq.
Telecopy: 404/233-5824
Telephone: 404/▇▇▇-▇▇▇▇
and to: ▇▇▇▇▇ & Company
▇▇▇ ▇▇▇▇ ▇▇▇., ▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ ▇▇, Esq.
Telecopy: 212/223-2379
Telephone: 212/▇▇▇-▇▇▇▇
or to such other address as any party may have furnished to the other parties in
writing in accordance with this Section.
10.3 Entire Agreement. The exhibits and schedules hereto are incorporated
herein by reference. This Agreement and the documents, schedules and
instruments referred to herein and to be delivered pursuant hereto constitute
the entire agreement between the parties pertaining to the subject matter
hereof, and supersede all other prior agreements and understandings, both
written and oral, among the parties, or any of them, with respect to the subject
matter hereof, except for the non-disclosure letter agreement between Parent and
Pequot dated as of July 8, 1998. There are no other representations or
warranties, whether written or oral, between the parties in connection the
subject matter hereof, except as expressly set forth herein.
10.4 Assignments; Parties in Interest. Neither this Agreement nor any of the
rights, interests or obligations hereunder may be assigned by any of the parties
hereto (whether by operation of law or otherwise) without the prior written
consent of the other parties, except that the rights, interests, and obligations
of Sub hereunder may be assigned to any direct wholly owned Delaware subsidiary
of Parent without such prior consent. Subject to the preceding sentence, this
Agreement shall be binding upon and inure solely to the benefit of each party
hereto, and nothing
30
herein, express or implied, is intended to or shall confer upon any Person not a
party hereto any right, benefit or remedy of any nature whatsoever under or by
reason hereof, except as otherwise provided herein.
10.5 Governing Law. This Agreement, except to the extent that the CBCA or
the DGCL is mandatorily applicable to the Merger, or to the rights of the Pequot
Shareholders or the other parties hereto with respect to the Merger, shall be
governed in all respects by the laws of the State of Georgia.
10.6 Headings. The descriptive headings herein are inserted for convenience
of reference only and are not intended to be part of or to affect the meaning or
interpretation hereof.
10.7 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original but all of which taken
together shall constitute a single agreement.
10.8 Severability. If any term or other provision hereof is invalid, illegal
or incapable of being enforced by any rule of law or public policy, all other
conditions and provisions hereof shall nevertheless remain in full force and
effect so long as the economics or legal substance of the transactions
contemplated hereby are not affected in any manner materially adverse to any
party. Upon determination that any term or other provision hereof is invalid,
illegal or incapable of being enforced, the parties hereto shall negotiate in
good faith to modify this Agreement so as to effect the original intent of the
parties as closely as possible to the fullest extent permitted by applicable law
in an acceptable manner to the end that the transactions contemplated hereby are
fulfilled to the extent possible.
10.9 Post-Closing Access. For a period of five years after the Closing Date,
the Pequot Shareholders and their agents and representatives shall have
reasonable access to the books and records of the Pequot Business.
10.10 Post-Closing Notice. To the extent the Surviving Corporation receives
written notice of any event or circumstance that materially affects any of the
Pequot Shareholders, the Surviving Corporation shall promptly notify the
affected Pequot Shareholder of such matter, information, or event and shall
provide them with copies of all relevant documentation or correspondence in
connection thereto.
10.11 Certain Definitions. As used herein:
(a) the term "Permitted Liens" shall mean (a) Liens for taxes,
assessments or other governmental charges or levies not yet due; (b) statutory
Liens of landlords and Liens of carriers, warehousemen, mechanics, materialmen
and other Liens imposed by law created in the ordinary course of business for
amounts not yet due; (c) Liens (other than any Lien imposed by ERISA) incurred
or deposits made in the ordinary course of business in connection with worker's
compensation, unemployment insurance or other types of social security; (d)
minor defects of title, easements, rights-of-way, restrictions and other similar
charges or encumbrances not materially
31
detracting from the value of the Pequot Real Property or interfering with the
ordinary conduct of any of the Pequot Business; and (e) those Liens listed on
Schedule 10.11 hereto;
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(b) (i) any representation or warranty stated to be made "to the
knowledge" of a party shall refer to such party's knowledge following reasonable
inquiry as to the matter in question; and (ii) any representation or warranty
stated to be made "to the knowledge of Pequot" shall refer to the knowledge,
subject to clause (i) above, of any of the Pequot Shareholders; and
(c) the term "Subsidiary" or "Subsidiaries" means any Entity of which
Parent (either alone or through or together with any other Subsidiary) owns,
directly or indirectly, stock or other equity interests the holders of which are
entitled to more than 50% of the vote for the election of the board of directors
or other governing body of such Entity (including Sub); provided, however, that
with respect to the Parent, the terms "Subsidiary" and "Subsidiaries" shall not
include Pequot or University Netcasting, Inc.
- SIGNATURES ON THE FOLLOWING PAGE -
32
IN WITNESS WHEREOF, Parent, Sub and Pequot have caused this Agreement to be
signed and delivered by their respective duly authorized officers, and each
Pequot Shareholder has signed and delivered this Agreement, all as of the date
first written above.
"Pequot"
Pequot Systems, Inc., a Connecticut corporation
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇
---------------------------------------
Title: President
------------------------------------
"Parent"
IXL Holdings, Inc., a Delaware corporation
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
---------------------------------------
Title: Executive Vice President
------------------------------------
"Sub"
iXL-Connecticut, Inc., a Delaware corporation
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
---------------------------------------
Title: Executive Vice President
------------------------------------
- SIGNATURES CONTINUE ON THE FOLLOWING PAGE -
33
"Pequot Shareholders"
/s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇
------------------------------------------
▇▇▇▇▇▇ ▇▇▇▇▇▇
Address: ▇▇ ▇▇▇▇▇▇▇ ▇▇.
▇▇▇▇▇▇, ▇▇
/s/ ▇▇▇▇▇▇▇ ▇▇▇▇
------------------------------------------
▇▇▇▇▇▇▇ ▇▇▇▇
Address: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇
▇▇ ▇▇▇▇▇▇▇ ▇▇.
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
/s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
------------------------------------------
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Address: ▇ ▇▇▇▇▇ ▇▇.
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
34
EXHIBITS
--------
Parent's Closing Certificate...................................... Exhibit A-1
Sub's Closing Certificate......................................... Exhibit A-2
Agreement to be Bound by Registration Rights Agreement............ Exhibit B
Option Agreement.................................................. Exhibit C
Opinion of Counsel to Parent and Sub.............................. Exhibit D
Pequot's Closing Certificate...................................... Exhibit E
Agreement to be Bound to Stockholders' Agreement.................. Exhibit F
Opinion of Counsel to Pequot...................................... Exhibit G
SCHEDULE 4.3(A)
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CAPITALIZATION OF PEQUOT
SCHEDULE 4.3(B)
---------------
LIENS ON STOCK
SCHEDULE 4.5
------------
CONFLICTS, REQUIRED FILINGS AND CONSENTS OF PEQUOT
SCHEDULE 4.7
------------
EXCEPTIONS TO ABSENCE OF CHANGES OF PEQUOT
SCHEDULE 4.8
------------
UNDISCLOSED LIABILITIES OF PEQUOT
SCHEDULE 4.9
------------
EXCEPTIONS TO TITLE TO PROPERTIES OF PEQUOT
SCHEDULE 4.10
-------------
BAD EQUIPMENT OF PEQUOT
SCHEDULE 4.12
-------------
LIENS ON AND LOCATION OF REAL PROPERTY OF PEQUOT
SCHEDULE 4.13
-------------
LEASES OF PEQUOT
SCHEDULE 4.14
-------------
CONTRACTS OF PEQUOT
SCHEDULE 4.15
-------------
DIRECTORS AND OFFICERS OF PEQUOT
SCHEDULE 4.16
-------------
PAYROLL INFORMATION OF PEQUOT
SCHEDULE 4.17
-------------
LITIGATION
SCHEDULE 4.18
-------------
EMPLOYEE BENEFIT PLANS/LABOR RELATIONS OF PEQUOT
SCHEDULE 4.19
-------------
ERISA ISSUES OF PEQUOT
SCHEDULE 4.21
-------------
PEQUOT PERMITS
SCHEDULE 4.23
-------------
PEQUOT BROKERS
SCHEDULE 4.25
-------------
INTEREST IN CUSTOMERS, SUPPLIERS, COMPETITORS
SCHEDULE 4.28
-------------
INSURANCE OF PEQUOT
SCHEDULE 5.3
------------
CONFLICTS, REQUIRED FILINGS AND CONSENTS OF PARENT AND SUB
SCHEDULE 5.4
------------
PARENT LITIGATION
SCHEDULE 5.5
------------
PARENT AND SUB BROKERS
SCHEDULE 5.6
------------
OUTSTANDING OBLIGATIONS TO ISSUE OPTIONS, WARRANTS
OR OTHER PARENT STOCK RIGHTS
SCHEDULE 5.7
------------
SUBSIDIARIES OF PARENT
SCHEDULE 5.9
------------
PARENT UNDISCLOSED LIABILITIES
SCHEDULE 5.13
-------------
EXCEPTIONS TO ABSENCE OF CHANGES
SCHEDULE 6.6
------------
PARENT OPTIONS TO NON-MANAGEMENT EMPLOYEES OF PEQUOT
SCHEDULE 7.1(C)
---------------
PARENT CONSENTS
SCHEDULE 7.2(C)
---------------
PEQUOT CONSENTS
SCHEDULE 10.11
--------------
PERMITTED LIENS OF PEQUOT